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Landlords Moonlight as Insurance Salesmen

Apartment landlords are getting into a new line of business: selling renters insurance on a group basis to their tenants. Landlords say the practice benefits them by lowering their risk of lawsuits from tenants. Another benefit is the commission that some landlords charge cooperating insurers for each policy sold, creating a modest profit center.

And at least one major landlord, Home Properties of Rochester, N.Y., is going so far as to roll out a panoply of discounted insurance products to its tenants, which may help in tenant retention, according to Robert Blackburn, director of risk management for Home Properties. His firm offers not only renters insurance but also health and auto insurance, all at a discount.

“This is a program that will differentiate us from the next landlord,” Blackburn says. If tenants are able to buy auto, health and renters insurance at a discount, they may say, ‘let's stay here.’”

Other landlords hawking renters insurance directly to tenants are American Investment and Management Co. (AIMCO) of Denver and Camden Communities of Houston.

Getting into insurance sales is a sign that landlords remain eager to offer new value-added services. The opportunity is enormous: Nearly two-thirds of all renters do not carry renters insurance, according to a study commissioned by Independent Insurance Agents & Brokers of America, an Alexandria, Va.-based trade group.

While some landlords in strong markets with high rents and low vacancy rates can require apartment tenants to buy renters insurance, landlords in weaker markets are not in a position to tack on the cost of the premium to the rent.

To protect themselves from liability, a number of landlords have teamed up with property insurers to sell the policies, with landlords acting as “front men” for marketing. Renters insurance protects both personal property, as well as shielding tenants from third-party liability. The policies typically provide $20,000 to $25,000 worth of coverage for property and liability combined, with monthly premiums ranging from $10 to $15 monthly.

The practice of landlords selling group insurance is “not dissimilar to your alma mater sending you a pitch for a credit card,” says Alexandra Glickman, practice leader for real estate in the Los Angeles office of Arthur J. Gallagher & Co., the Itasca, Ill.-based risk-management firm.

Landlords advertise the insurance packages on Web sites, and often include a pitch for insurance when an apartment renter signs a lease. Beyond the advantages of insurance, renters benefit from the discounted premiums, which can be slightly lower than privately purchased policies. In some cases, landlords pocket a small commission paid by insurers — in one case, about $2 for each policy sold — although others forego the fee.

AIMCO is offering renters insurance — ranging in coverage from $10,000 to $50,000 with monthly premiums of $9 to $13 — to its renters in Rockville, Md. The company has a concentration of more than 14,000 rental units in the city, making Rockville a good starting point for launching a national insurance program. “We view it as an added amenity to tenants, like paying for a covered parking space,” says risk manager Joseph Milan. The big difficulty is finding an insurer that can accommodate AIMCO's renters in 47 states and Puerto Rico, adds Milan. “It's a formidable problem.”